SMM Evening Comments (May 24)

SHANGHAI, May 24 (SMM) – SHFE nonferrous metals, except for tin, closed higher on Friday, with the biggest gain of 3.1% in nickel. Aluminium climbed 0.9%, lead and copper advanced 0.8%, and zinc gained 0.3%.

The ferrous complex traded mixed. Coking coal and coke rose close to 2.3%, and iron ore gained 0.3% while hot-rolled coil slipped 0.2% and rebar lost 0.3%.

Copper: Copper prices rallied as the US dollar weakened on downbeat US manufacturing data. The most active SHFE July contract followed its LME counterpart higher during the day and gained 0.79% to 47,170 yuan/mt. The market tonight is likely to continue to seek direction from its London counterpart, and the SHFE 1907 contract is expected to try to stand above the 47,200 yuan/mt level.

Aluminium: With longs adding their positions, the most traded SHFE July contract extended overnight gains to close at an intraday high of 14,240 yuan/mt, gaining 0.92% on the day. This helped it return above the middle Bollinger band and recover most of the losses made earlier this week. The contract is expected to continue to climb tonight, with most transactions at 14,050-14,300 yuan/mt.

Zinc: Following an advance in LME zinc, the most active SHFE July contract recovered from overnight losses to an intraday high of 20,590 yuan/mt before it pared some gains to close 0.27% higher at 20,435 yuan/mt. The unwinding of short positions mainly accounted for today’s gains in SHFE zinc. Investors continued to move their positions to forward contracts, with open interest for the August contract gaining close to 18,000 lots on the day. While social inventories of refined zinc across Shanghai, Tianjin and Guangdong fell substantially this week, the anticipated arrival of shipment en route grew the expectations for an increase in inventories. SHFE zinc is likely to open lower and trade around the lower Bollinger band tonight, as its LME counterpart has come off from earlier highs.

Nickel: The most traded SHFE July contract traded in a tight range above the daily moving average before it hit its daily upper limit of 102,830 yuan/mt in the last 30 minutes before the closing bell. It finished the trading day 3.07% higher at 99,990 yuan/mt, with its KDJ lines converging and a MACD red bar extended. The contract is expected to try to hold onto the 100,000 yuan/mt level tonight.

Lead: As longs added and shorts cut their positions, the most active SHFE July contract extended overnight gains to an intraday high of 16,295 yuan/mt before it ended the trading day 0.84% higher at 16,265 yuan/mt. Longs have continued to load up their positions for two consecutive days, which bolstered the prices and lifted the five- and 10-day moving averages, showing signs that SHFE lead will likely to move out of its current range. The contract is expected to try to stand firmly above the 20-day moving average tonight.

Tin: The most traded SHFE September contract extended overnight losses to a multi-month low of 143,500 yuan/mt before a short-covering bolstered it to end 0.06% weaker at 144,430 yuan/mt. SHFE tin has yet to shrug off weakness and is expected to test support at the 144,000 yuan/mt level.